Mtn Group Limited · JSE:MTN
Mtn — MTN Nigeria — Q1 2019 Earnings Presentation
52 slides from Mtn's earnings presentation, May 13, 2019
Slide 1: MTN Nigeria Q1 2019 Analyst Presentation
MTN Nigeria Q1 2019 Analyst Presentation May13, 2019
Slide 2: Disclaimer
Disclaimer MTN Company Group tion, any question or answer session and any written or oral material discussed or distributed during the presentation meeting or otherwise in connection with it. made available to you in connection with the presentation may be passed on, copied, reproduced, in whole or
Slide 3: Disclaimer | continued
Disclaimer | continued The presentation includes market share and industry data obtained by MTN and the Company from industry publications and surveys and internal surveys. MTN and the Company may not have access to the facts and assumptions underlying the numerical data, market data and other infor
Slide 4: Agenda
Agenda Time Minutes Agenda Presenter Page No. 08:30-09:00 30 Tea & Coffee All 09:00-09:15 15 Welcome and introduction of Speakers Ferdi Moolman 5 09:15-09:30 15 Strong position in the right market Ferdi Moolman 12 09:30-10:00 30 Exciting demographic opportunity Ferdi Moolman 16 10:00-10:15 15 Corpor
Slide 5: Welcome and Introduction of Speakers
Welcome and Introduction of Speakers
Slide 6: Leading mobile operator in Nigeria
| leading mobile operator in Nigeria Largest mobile 50% operator in Nigeria 60.3 million market share by subscribers revenue #1 player in Nigerian telecoms market since launch Source: Pyramid 20.4 million Largest fibre network coverage active data users >25,800km Strong management with mix of local
Slide 7: Milestones | #1 player in the Nigerian telecoms market since launch
Milestones | #1 player in the Nigerian telecoms market since launch 2001 2005 2010 2013 2014 2015 2016 2017 2018 1st call on Launched fibre Commissioned one Reached over Sold 9k towers Acquired 700MHz Visafone Modernised Obtained Super MTNN network network of the 50m subs to IHS dr
Slide 8: Responsibility | enabling broader economic & social development
Responsibility | enabling broader economic & social development Carrier of carriers to 20 Million 1 Enabling over Invested over Each month, over N20 billion in 16million people with 100+ ISPs, Nigerians live in Billion various Corporate no airtime connect Carriers & ICT places where MTN is with thei
Slide 9: Management Team | balanced structure with versatile team
Management Team | balanced structure with versatile team Direct report to CEO Direct report to COO Chief Finance Officer Randy Bikraj • Combined telco experience Adekunle Awobodu Chief Information Officer of over 200 years Joined MTN: 2002 16 years at MTN Years of telco experience: 15 • Broad geogra
Slide 10: Executive profiles
Ferdi Moolman Mazen Mroue Adekunle Awobodu Tobechukwu Okigbo Mohammed Rufai Executive, Chief Technical MTN Nigeria CEO MTN Nigeria COO MTN Nigeria CFO Corporate Relations Officer Appointed in 2015 Appointed in 2018 Appointed in 2016 Appointed in 2017 Appointed in 2019 Formerly CFO of MTN
Slide 11: MTN investment case
MTN investment case Strong Exciting position in the right demographic market opportunity • Largest African economy • Most populous African country and 7th largest globally Clear strategy • Largest telecoms market in Africa • Fast growing youthful population • Leading mobile network • Low data, finte
Slide 12: Strong position in the right market
Strong position in the right market
Slide 13: Largest African economy & telecoms market
Strong position in the right market | largest African economy & telecoms market Nigeria is the largest African economy with one of the youngest populations. Largest African Economy Most Populous African Country and 7 th Largest Globally Further c.2.8% p.a. real GDP growth expected until 2022(1)
Slide 14: MTN Nigeria is the clear market leader
Strong position in the right market | MTN Nigeria is the clear market leader Leader in the Nigerian telecoms market with a strong competitive advantage across all segments. (Subscribers Market Share in 2018) (Value Share in 2018) 11% 9% MTNN modernised its definition of subscribers in 2017(1) 26%
Slide 15: Nigerian telecoms competitive landscape
Strong position in the right market | Nigerian telecoms competitive landscape Market share Markets players Competitive Positioning and position1 Landscape • Leading operator in voice and wholesale lease line • Largest physical distribution network • Nigeria is a value seeking • Most expansive networ
Slide 16: Exciting demographic opportunity
Exciting demographic opportunity
Slide 17: Young population & mobile penetration upside
Exciting demographic opportunity | young population & mobile penetration upside Historical (13A-18A CAGR) Forecast (18A-23E CAGR) South Africa Median c.26 million population 173% • Low mobile Age increase in 5 years (1) penetration vs. 18 20 27 44 WE 144% African peers 3.1% 3.0% 91.8% 77.7% 78.8% 95
Slide 18: Penetration growth driven by rural expansion
Exciting demographic opportunity | penetration growth driven by rural expansion and data access, which creates significant opportunities for growth Breakdown of Nigerian Population Breakdown of MTNN Mobile Subs (1) Total Population: 200m Mobile Subs: 60.3m Rural 25% Urban Rural 47% 53% Urban 75% Sou
Slide 19: Growth from smartphone and mobile data
Exciting demographic opportunity | growth from smartphone and mobile data (3) Source: Pyramid Source: WBIS Source: Pyramid 84% 2018A 2023E WE 93% 99% 104% 95% 93% 47% WE South Africa 75% 76% +1.1x 47% +1.3x 16% 75% 15% 6% South Africa +2.0x 45% 4% 0% 2014A 2018A 2018A WE WE Nigeria Nigeria Nigeria S
Slide 20: Expected data usage and revenue growth
Exciting demographic opportunity | expected data usage and revenue growth Data Usage per User Data Revenue Contribution Data Usage per User (1) Data Revenue Contribution (1) (MB per Month) (2G/3G/4G) CAGR 2018A 2023E: +48% +26 p.p. 2,954 1,803 52% 53% 52% 844 26% 250 WE WE South Africa Nigeria South
Slide 21: Fintech and digital present a key opportunity
Exciting demographic opportunity | Fintech and digital present a key opportunity Mobile leapfrogging a number of traditional industries Low Penetration of Banking Services Strong growth potential of Fintech / Digital content and services 99.6m Addressable Market (Adult Population) 62.7m Banked Popul
Slide 22: Trends suggest great opportunity for MTNN
Exciting demographic opportunity | trends suggest great opportunity for MTNN Strong growth potential from favourable market trends. Upside from Subscriber Growth ARPU Upside Potential Increase in # of Data Users Penetration (4) 3G/4G Upside from Fintech GDP Growth (6) 48% 87% Data Usage and Digital
Slide 23: Corporate Governance & Regulation
Corporate Governance & Regulation
Slide 24: Regulator-led operating environment
Regulator-led operating environment Regulators Industry Bodies Mobile Network Operators Tier II InfraCos ISPs Clearing Houses VAS Aggregators Other Operators 24
Slide 25: Regulatory developments
Regulatory developments Obtained approval to NCC approved Obtained approval to Anticipated Events use 700MHz spectrum disconnection of MNOs and Clearinghouses for use 800MHz spectrum acquired from the NBC • Issuance of failure to settle acquired from Visafone for telecommunication Regulatory framewo
Slide 26: Technology & Network Excellence
Technology & Network Excellence
Slide 27: Network | unmatched nationwide coverage
Network | unmatched nationwide coverage Leading Mobile Network #1 213 Kano Coverage by Population Most expansive network coverage amongst peers 4G Coverage 24% Best network quality with highest NPS amongst Best Coverage Abuja 3G Coverage Network NPS 71% peers in the country (1) 2G Coverage 87% L
Slide 28: Coverage Optimization | Rural coverage
Coverage Optimization | Rural coverage U900 Rural Rollout 5.7K Telecom Infra 3.7K Project(TIP) Facebook partnership 11012 5288` 1500 Collaborations with OPEN RAN Partners 2018 2019 2020 Efficient increase in 3G 271 2271 Innovative business coverage and quality with models less sites Lean CAPEX 2018
Slide 29: Attractive return profile
Attractive return profile Note: Q1 2019 numbers are unaudited
Slide 30: Financial snapshot
Financial snapshot (NGN bn) Total Revenue Quarterly Total Revenue 2016 2017 2018 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Y-o-Y Growth -2% 12% 17% 14.5% 19.9% 18.5% 16.6% 13.2% 794 887 1039 249 256 259 275 282 EBITDA (1) Quarterly EBITDA EBITDA 45% (2) 39% 44% (3) (3) 41.8% 44.3% 43.5% 44.7% 53.3% IA
Slide 31: Understanding MTN Nigeria Revenue profile
Understanding MTN Nigeria Revenue profile Revenue Costs Capex Cash Flow Capital Structure Q1 2019 Split Composition Key Drivers • Network quality and availability • Marketing campaigns • Voice Service • Customer value management Voice 74.9% • Interconnect • Changes in ITRs • New plans with efficient
Slide 32: Total revenue
Total revenue Total Revenue Split (NGN bn) Revenue Costs Capex Cash Flow Capital Structure Other Fintech Digital Data Voice 794 887 1,039 CAGR: 14% (NGN bn) 44 29 27 37 155 22 60 24 11 (6) 2 2 34 282 13 249 80 108 58 784 Q1 2018 Voice Data Digital Fintech Other Q1 2019 660 609 CAGR Comments 2016 201
Slide 33: Cost base summary
Cost base summary Revenue Costs Capex Cash Flow Capital Structure Q1 2019 Composition Key Drivers Split • Mobile Termination Rates (MTRs) • Interconnect • Outgoing Minutes • Dealer Commissions • Channel Mix Cost of Sales • Digital / Fintech Costs 41% • Discount Structure • Regulatory Fees and Levies
Slide 34: Cost breakdown | cost of sales
Cost breakdown | cost of sales Cost of Sales Split (NGN bn) Revenue Costs Capex Cash Flow Capital Structure Gross Understanding Cost of Sales margin 76.8% 79.3% 80.8% 80.0% 81.0% Increased interconnect cost due to: 184 184 199 50 54 growth in subscriber base 14 Increased uptake of customer value 12
Slide 35: Cost breakdown | operating expenses (Opex)
Cost breakdown | operating expenses (Opex) Opex Split (NGN bn) Revenue Costs Capex Cash Flow Capital Structure Opex intensity 32.0% 40.1% 37.5% 38.2% 27.7% IAS 17: Understanding Opex 36.9% 254 356 390 Lower Opex due to the adoption of IFRS 16 25 (change in accounting treatment of lease 95 78 17 rent
Slide 36: IFRS 16 | A new standard for lease contracts
IFRS 16 | A new standard for lease contracts • IFRS 16 replaces IAS 17 and is effective from 1 January 2019. • Applied prospectively, with no prior period restatement. • Recognition and subsequent measurement • IFRS 16 requires all leases to be brought on balance sheet resulting in the recognition o
Slide 37: IFRS 16 | Impact on income statement
IFRS 16 | Impact on income statement -Q1 2019 Revenue Costs Capex Cash Flow Capital Structure PAT % EBITDA % N25.8bn (9.2%) Lease rental 53.3% 44.2% N1.4bn (0.5%) N3bn (1%) 17.2% 18.2% Lease rental, Depreciation, Finance Cost and Tax IFRS 16 IAS 17 37
Slide 38: Capital expenditure breakdown
Capital expenditure breakdown Capital Expenditure Revenue Costs Capex Cash Flow Capital Structure (NGN bn) Overview of Capex 196 225 184 18 63 7 5 22 network, specifically: 5 4G rollout in major cities across the 37 country to improve network quality 30 0.5 Other Capex 3 3G densification and expansi
Slide 39: Free cash flow analysis
Free cash flow analysis (NGN bn) Revenue Costs Capex Cash Flow Capital Structure 2016 2017 2018 Q1 2019 EBITDA (1) 356 346 434 150 Capex (2) (165) (203) (211) (63) AFCF 191 143 223 87 Change in Net 61 (72) (2) (31) Working Capital Net Interest Paid (29) (36) (17) (21) Income Tax Paid (80) (59) (22)
Slide 40: Capital structure overview
Capital structure overview (NGN bn) Revenue Costs Capex Cash Flow Capital Structure Overview and Financing Strategy Dividend Policy MTNN has historically maintained moderate leverage; remains in a comfortable • MTNN has historically aimed to maximise dividends position relative to covenants on curre
Slide 41: Well positioned for the long term
Well positioned for the long term
Slide 42: The Bright Journey from Basics to Best
The Bright Journey from Basics to Best Key priorities BBest R Returns and I Ignite G Growth through H Hearts T Technology customer efficiency commercial data and digital and minds excellence experience focus performance Sustain #1 position in Convert the last 24 Extend and personalize Dual-d
Slide 43: Extending BRIGHT Revenue Streams
Extending BRIGHT Revenue Streams Looking ahead 43
Slide 44: Opportunity to be unlocked across the curves
Opportunity to be unlocked across the 6 curves Curve 6 Curve 5 Wholesale (fixed and mobile) Curve 4 Enterprise Curve 3 Fintech Curve 2 Consumer mobile Digital Curve 1 datadata and & consumer consumer fixed fixed data Consumer mobile data voice, VAS and hardware Consumer Enterprise Wholesale 44
Slide 45: In Nigeria VOICE
In Nigeria VOICE Market growth Q1 2019 Result MTN plan drivers +12.7% • Low penetration supports • Best practice pricing & combo Bundles subscriber growth • Ultra-rural site roll-out Voice revenue • Predominantly young population • Personal pricing with AI • Price elasticity potential still exists •
Slide 46: DATA is our core medium-term growth driver
DATA is our core medium- Market growth Q1 2019 Result MTN plan drivers +31.5% * • Low data penetration • CHASE Program Deliverables: Data revenue • 4G Coverage is < 50% o 3G national coverage & extended • Growing demand for data 4G • Increased level of awareness o Handsets customized to meet immedia
Slide 47: DIGITAL
DIGITAL Market growth Q1 2019 Result MTN plan drivers -68.0% • Increasing data adoption • Launch own services + platform Digital revenue • Increasing awareness of digital • Music, Video, Gaming & messaging services build • OTT service gap • Local content aggregation & • Relevant local content availa
Slide 48: Fintech
Fintech Market growth Q1 2019 Result MTN plan drivers +22.9% • Low level of banking penetration • Leverage Super Agent approval in Fintech revenue • Limited Traditional banks footprint principle and pursue final approval in rural areas • Obtain PSB approval • Large cash economy • Sync products distr
Slide 49: Enterprise
Enterprise Market growth Q1 2019 Result MTN plan drivers +37.4% • Enterprise is mobile centric • Deepen enterprise penetration • Underserved SMEs across different markets Enterprise revenue • Unserved large SME market • Deploy vertical solutions across segments • Low level of ICT adoption • Expand c
Slide 50: Wholesale leverage Pan-African infrastructure across Group
Wholesale leverage Pan-African infrastructure across Group.. Market growth Q1 2019 Result MTN plan drivers +25.8% • Huge capacity demand • Monetize existing infrastructure wholesale revenue • Satellite to fibre migration • Localize Global Connect capabilities • Managed MPLS needs • Leverage Yellow c
Slide 51: Q&A
Q&A
Slide 52: Thank you
Thank you Investor Relations Contact: Chima Nwaokoma Snr. Manager, External Relations everywhere you go MTN Nigeria Communications Plc +234 803 200 0186 [email protected]